Investing.com -- Evercore ISI analyst Julian Emanuel has set a base case target of 7,750 for the S&P 500 by year-end 2026 while assigning a 30% probability to a bull case scenario that would push the index to 9,000, driven by AI-led gains in technology, communication services and consumer discretionary stocks.

In a note to clients on Monday, Emanuel argued that the collision of a structural technology-driven bull market with sweeping geopolitical transformation is creating a wider range of outcomes than investors or forecasting tools would normally model, raising the probabilities of extreme outcomes in both directions.

The Evercore ISI strategist drew parallels, stating: “The Pandemic changed everything. Warlike stimulus, surging M2, and a productivity shock collide with an 'AI Revolution' – reminiscent of the 1920s and 1990s."

He expects that this could push productivity growth to 3% by the end of the decade.

The firm recommends long-dated calls on what it calls the "AI Class of 2026" stocks and the QQQ ETF for "seemingly unimaginable" upside, while also suggesting a collar strategy on SPY to hedge near-term risks from oil and interest rate moves.

Emanuel cautioned, however, that artificial intelligence remains probabilistic and constrained. Large language models exhibit what Evercore ISI called a "Narrow Consensus" bias, where responses cluster around consensus and underestimate tail outcomes, meaning durable value will come from domain expertise and ownership of complete workflows rather than AI capability alone.

Prediction markets, Emanuel added, reveal what the crowd believes but do not discover the future, making them less reliable for continuous, long-dated, or tail-heavy outcomes.